News Release: Landmark Ruling on AI-Generated Content and Copyright Infringement in China

In a groundbreaking case that underscores the evolving legal landscape surrounding generative artificial intelligence (AI) and intellectual property (IP) rights, the Hangzhou Internet Court has issued (as maintained by the appellate court) a significant ruling in a dispute involving AI-generated images of the popular Ultraman character. This case marks the first of its kind in China, addressing the liability of AI platforms in copyright infringement disputes.

Case Summary

The plaintiff, a Shanghai-based company, is the copyright holder of the Ultraman series. It brought a lawsuit against the defendant, a Hangzhou-based AI technology company, for copyright infringements and unfair competition. The defendant operates an AI platform named Tentacle AI (literal translation of its Chinese name) which offers various functionalities, including image generation and model training. The platform featured AI-generated images and models of Ultraman, through which users could download, share, or further train AI-featured models using the platform's tools. The Ultraman LoRA model, in particular, was created by users through uploading Ultraman images, selecting a base model, and adjusting parameters to generate images substantially similar to the Ultraman character.

The plaintiff alleged that the defendant's platform facilitated the creation and dissemination of infringing content, hence infringed their information network dissemination rights and constituted an unfair competition action. The plaintiff sought an injunction to stop the infringement and claimed damages of RMB 300,000.

The defendant countered that their platform merely integrated third-party open-source models and provided a service for users to train and generate images. They argued that the platform is entitled to the protection of the "safe harbor" rule, which typically shield service providers from liability for user-generated content, provided they do not actively participate in the infringement.

IP Infringement or Unfair Competition?

Infringement of Information Network Dissemination Rights

The court found the copyright infringement claim in favor of the plaintiff. When determining intermediary liabilities of AI service providers, the court emphasized that AI service providers must be assessed based on their specific actions and the context in which they operate. While the defendant did not directly engage in the infringing activities, it was found to have contributed to the IP infringement by failing to take necessary measures to prevent it. To come to this conclusion, the court considered several factors, including the commercial nature of the platform, the prominence of the Ultraman brand, the obviousness of the infringement, and the potential for widespread dissemination of the infringing content. The defendant's failure to implement adequate preventive measures, despite having the ability to do so, led the court to find subjective negligence, which was a key factor in the ruling.

No Unfair Competition

On the other hand, the court overruled the defendant's unfair competition claims. The court resonated that the platform's business model aimed at expanding the application scenarios of generative AI and enhancing user creativity, none of which is in violation of the principles of good faith or commercial ethics. The court noted that the technology itself is neutral and even when the technology was used by the users in a way to generate works that are similar to others’ copyrighted works, the platform or its technology should not be considered as disrupting the competitive order.

Court's Decision

Therefore, the court ordered the defendant to cease the infringement and compensate the plaintiff in the amount of RMB 30,000 (circa USD 4,200) to cover the damages it suffered and the reasonable expenses it incurred to stop the infringements. Additionally, the court ordered the defendant to remove the infringing images and models from the platform.

However, the court rejected the plaintiff's broader request to delete all materials and data related to the Ultraman character, noting that not all uses of the character constituted infringement. The court recognized that users could still engage in legitimate activities such as learning, research, and personal enjoyment of this character without violating the copyright laws.

The above judgment has been maintained by the appellate court, and therefore become final.

Insight

This landmark decision by the Hangzhou Internet Court provides valuable guidance on the legal responsibilities of AI platforms in the context of copyright infringement. It underscores the need for AI service providers to implement robust measures to prevent the misuse of their technologies while fostering an environment that encourages innovation and creativity. As AI technologies become increasingly sophisticated, courts around the world will need to grapple with similar issues, balancing the rights of content creators with the potential of AI to drive innovation, and this case will likely serve as a valuable reference for future disputes in this rapidly developing field.

联系人:

陈瑞金

合伙人，上海

电话：+86 21 8013 5220

电邮：reking.chen@yaowanglaw.com